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Wednesday, July 15, 2009

Elliott Wave Update ~ 15 July

"Bulls got to take it as high above the neckline as they can" - ok so I quoted myself.

But still - that was some serious upside surprise, the hallmark of P2 it seems. Another 90% up day (this one easily surpasses) and the second biggest advance/decline volume ratio of P2. Ended the day at a 28 - 1 score. So P2 would seem to be in its next major advance up to a new peak.

In review, the market seemed to have traced a double zigzag from 666 to 956 peak. The subwaves fit best into that structure and zizgags are what we expect for a wave 2 sharp rally. However P2 failed to achieve a high enough price and also likely needed more time. So a pullback occurred and now it certainly seems P2 is on its way again. You only get to have 3 zizgags in a corrective rally, no matter how big.

EW theory works on sentiment. Its hard to gauge just how low (or high) sentiment readings must go. However I have been watching the $BPSPX chart as that is the only daily updated thing I can really go on. I showed it just last night. And watching the RSI readings are useful in certain situations it seems. Something like RSI readings wouldn't have helped much on the way down in P1. But they are useful on rallies of a primary size or bigger. The 2003-2007 rally also gave reliable RSI pullbacks. So every indicator has its usefulness I think at certain times.

Regardless I really am having a tough time figuring out the squiggles in trying to see where it may go short term. No matter though. What this does remind me is a small bit of the initial rally off the 666 low in its initial bullishness. So will there be a big fat wave [ii] back to the neckline or even below 912? That's hard to say after a 28-1 up day. Sometimes these "kickoffs" have their own targets before taking a deeper breather. It almost "feels" as if the market is tired and bored of oscillating between 878 - 930 (with the pops to 950) and wants to go somewhere else. That would mean above 956. It sure was in a hurry today.

The $BPSPX sentiment chart has now just begun to correct upwards. I expect a new high reading on this chart. So it'll be watched from here on out of course. Elliott Waves is about sentiment and the swings between pessimism and optimism.

Just remember the basics of the theory: P2 will end when most of the daily readers think I'm crazy calling for new lows or some kind of P3 wave. I myself may doubt things. So far none of us have much doubt probably. Some are even plotting the 2 right shoulders on the H&S and going to try to short it back to the neckline. Hey it might work, I rule out nothing and it would be a "normal" wave 2 retrace. But you got to be nimble because Mr. Market may not agree with it.


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